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Gas Prices + Japanese Earthquake = Rising Car Prices

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On: Mon, May 23, 2011 at 9:22AM | By: Chris Weiss


Gas Prices + Japanese Earthquake = Rising Car Prices

It's a story that began unfolding just shortly after the Japan earthquake, tsunami, and nuclear reactor meltdown ravished the nation and stagnated its auto production in mid March. Auto analytical group Edmunds suggests that the worst is yet to come, with soaring gas prices and model shortages combining to create the perfect storm of rising car prices.

With gas prices edging toward a nationwide average of $4 per gallon, consumers have been inspired to shop for new, efficient cars. At the same time, production on cars like the Toyota Prius and Nissan Leaf has been affected by the ongoing aftermath in Japan. Both those factors have led to depleted inventories at dealerships, a situation that's left little motivation for dealers to offer discounts, incentives, and sale events, something that they'd typically do during this time of year.

Edmunds doesn't mention it specifically, but I have a feeling the time of year isn't helping. For many, the summer is the season of vacations and road trips. Combine that with the near-historic gas-price highs and you have another motivating factor driving consumers to dealers in search of more efficient vehicles.

According to analysts' numbers, average discounts on vehicles in the U.S. were at a five-year low last month: $2,320 per vehicle, a figure that's $370 below average discounts in April of last year. As you'd expect, the hardest hit vehicles have been largely smaller, efficient cars like the Honda Civic, Toyota Corolla, Toyota Prius, and Ford Fiesta. According to numbers from Edmunds, the price of the Civic has jumped more than $1,600 between February and May, with the Corolla leaping more than $2,000.

So what do you do if you're in need of a new car? Wait. Edmunds predicts that the auto industry in Japan should rebound soon, meaning leveled stocks and returning incentives. Gas prices are expected to plateau sometime soon—possibly before summer, which should ease consumers' need to shop for new cars. Because the reasons for increased prices both seem to be short term, you'd be better off spending another month or two in your old, inefficient car than rushing to the dealership for a more efficient, but marked-up, car— Unless, maybe, you plan on driving a few thousand miles a week. Edmunds suggests waiting until winter or fall.

Alternately, buy right away. If you can't wait, Edmunds CEO Jeremy Anwyl: " It looks like it's going to be a bumpy ride on dealer lots through the next few months, so if you know you need a new vehicle this summer, Edmunds.com suggests buying right now."

For those that end up having no choice but to shop in the summer, your best bet may be to keep an open mind to less popular models. Anwyal said: "There may be some good deals available to car buyers this summer, but they might not necessarily be available on their first or second choice of vehicles."

Less popular and discontinued models like the Chevy Aveo and Impala have received robust incentives even in the face of rising prices on other models.

I'd suggest making some lemonade: Skip the chore of visiting the showroom this summer, plant yourself in your backyard to avoid excess travel, kick your feet up, and enjoy the warm, sunny weather. And if your spouse complains, explain how much money you're saving.




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